Famed Economist Steve Hanke Reveals How He ‘Killed’ Hyperinflation (Uncut) 03-28-2025

Famed Economist Steve Hanke Reveals How He ‘Killed’ Hyperinflation, Life Lessons

What happens then if the US hyper inflates? I mean, we can’t use, Americans can’t use another currency, can we? Well, yeah, you could use it. Could you imagine the Americans using the Euro or the Yen or the Swiss? No. What was President Reagan like? What’s your secret to a successful marriage? You’ve been with Mrs. Hankey for how many decades now? Oh, for many decades.

Well, you know, I mentioned to you, I’ve clearly lived a charm life. Reed Higgs, and that is definitive on the fact that what you said, which probably 99.9% of the population believes to be true, that the war pulled us out of the Great Depression, is simply not true. Okay, can you explain why? What’s wrong with what I said? I thought we were going to have a short interview.

This is a very special day. I’m here at the Johns Hopkins University campus in Baltimore. I’ve made this special trip down to see Professor Hankey, Steve Hankey, a very special guest that I’ve had on my show for years.

He’s a regular on the show. He comes on a couple of times a month. People can check out my interviews with Professor Hankey on my channel.

We do regular updates on macroeconomic news, and it’s my first time finally meeting him in person after, I think, seven years working together. We go way back to my Ketco days, and then I started my own channel, and you’ve been a regular, so very honored to meet you, sir. Thank you very much.

Great to have you in Baltimore, David. Actually, always good to see somebody in person. It’s my first time meeting you.

What was your first impression meeting me in person? Well, my impression was the guy looks just exactly like he does on the tube. You have a very interesting wall of photographs of you with very important dignitaries and people, so there’s a cutaway clip that I want to show Professor Hankey introducing his wall. I’ll do that in just a minute.

Professor, you are the applied economics professor here at Johns Hopkins University, and you’re a well-known monetarist, economist. You’ve helped stabilize currencies across the world. You’ve helped fix hyperinflation, among many other things.

Before we talk about the current macroeconomic landscape and your current work, what was one of your career highlights or one of the proudest moments of your career over the last 50 years, you would say? Well, we’ve got a half a century, so there’s a lot of stuff. You’ve been involved in South America. You’ve been involved in Yugoslavia.

You’ve been involved in Eastern Europe. The start, actually, at Johns Hopkins, I’m a professor in the department – I have my own institute, the Institute for Applied Economics, Global Health, and the Study of Business Enterprise, which I established with Professor Galambos, who’s a famous professor of business history. So that’s why the Study of Business Enterprise comes into the title of that thing, if you want to know.

So that’s one aspect, but I’m also a professor in the engineering school, the Department of Environmental Health and Engineering. That’s a modernized name, but when I first came, it was the Department of Sanitary Engineering. And what was I doing? I was really doing systems analysis, and the specialty was water resource economics.

So I was doing things like deciding or building models to determine the optimum size of pipes, literally. And one thing that’s still around, sewer interceptors, the big pipes that take the sewerage out and take it to the treatment plant. In Europe, they still use my design criteria that I developed.

I didn’t even know you had an engineering background. So I’ve done a lot of work in water resources. What did you do for the Reagan administration? You were on the Council of Economic Advisory.

Yeah, I was on the Council of Economic Advisors, and the main thing I did, I did a number of things, but the main thing I did, I was Reagan’s privatization guru. And the word privatize, actually, was Mrs. Hankey’s a Parisian, and I was giving a speech in Reno, Nevada. And the reason I was out there is that the big asset in the United States to privatize is public land.

You know, the public lands owned by state and local governments and the federal government in the United States cover a surface area that’s six times larger than France. So a huge amount of the United States, most of the western states are not privately owned, the land. So I was out in Nevada giving a speech, and I, as usual, I gave the draft to Mrs. Hankey, and she said, well, you’re using some kind of clunky language.

She says, you’re talking about, you want to privatize these public lands. And I said, oh, that sounds like a good idea. And there was a little problem.

People started pushing back about the use of the word because it wasn’t in the English dictionary. It was in the 80s. Yeah, and it’s a French word.

She’s French. So she literally imported it into the United States. And then in 1983, we ended up spending a lot of time lobbying Webster’s, a dictionary company, to put it in the dictionary.

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Go to join delete.me.com slash davidlin and use promo code davidlin at checkout or scan the QR code on the screen here to get 20% off and protect your privacy today. The other thing was at that point I was I was I was one of the very top water resource economists in the world, actually. So with with Reagan, I was in charge.

There was no water project that was proposed in the United States when I was working for Reagan that that didn’t have to go through me. He is so and I rejected all of them. Yeah, the benefits were less than the cost, basically.

So all reclamation projects, waterway projects, water reservoirs, all of it was we didn’t we didn’t do any any projects. So so the two big things were privatization and primarily the privatization of what we talked about then, our term surplus assets. We were trying to shrink the balance sheet of the federal government.

That was the idea. So so so that’s one aspect. Then the other aspect with this water thing.

And there’s something called a federal principles and standards and the federal principles and standards. It’s the technique and manual that’s used for benefit cost analysis to decide whether we should be investing in something. And I was the one in charge of the working group that rewrote that.

So those those were the two really big things. There were other things that were important. For example, I was one of many that was working on, in particular, Japanese trade.

Were you involved with the Grace Commission at all, which was kind of the doge at the time? Yeah, I was involved with the Grace Commission and Peter Grace. And that was. Tell us about that.

Well, that was a big exercise. Peter Grace, very competent businessman and very serious about the whole idea was making the government work more efficiently. So we had now I can’t remember, but I think I think we had like twenty seven hundred recommendations or something came out of that.

But almost none of them were ever implemented on. Because what happens, people don’t understand. The president is one thing.

But to actually implement something and get it done, you have to deal with the Congress. And if the Congress wants to put roadblocks up, they will. And they did.

They want to protect the bureaucrats. They want to protect the state from the taxpayers. The Congress, it’s a very bizarre kind of setup in a way, because congressmen and congresswomen, as well as senators, are supposed to be representing the taxpayer.

Actually, they’re representing lots of special interest groups. And one of the special interest groups are the bureaucrats. So the idea that you’re going to make the government efficient is fraught with all kinds of problems.

And that’s one of them. The other thing is that the actual bureaucrats themselves, they have completely different incentives than a private businessman. A private businessman, you have a private business.

Your incentive is to serve your clients in an efficient way and make a profit. A bureaucrat, and we know whether you’re doing that or not, because at the end of the year, you’ve got a profit and loss statement. Either it’s plus or minus.

And if it’s too many years when it’s minus, you’re going to be out of there. Now, a bureaucrat, after an action is taken by the bureaucracy, there’s nobody coming after the fact to say, oh, did it work or not work? No one ever looks at anything. They just do it.

Tell us about one time you helped stabilize hyperinflation. Any example that you’re directly involved in. Yeah, so I’ve been directly involved in killing more hyperinflations.

Now, that’s, David, 50 percent inflation per month or higher. That qualifies as hyperinflation. So the one that’s kind of dear to my heart is Bulgaria.

Bulgaria, the first monograph, short book that I wrote advocating that Bulgaria adopt a currency board system was in 1991. Now, what’s a currency board system? A currency board system is one in which you emit a local currency, and that local currency trades at a fixed exchange rate with some anchor currency. And it’s a credible link or fixed exchange rate because 100 percent reserves are required to back up the issuance of whatever the local currency happens to be.

So Bulgaria, as I say, in 91 and went there many times trying to sell the idea and basically say, I said, you know, the whole system they have is going to blow up with hyperinflation, which it did in 96. And then in 97, President Stoyanov invited me to become his chief advisor and install a currency board, which we did in July. The inflation rate was 242 percent per month.

So it was a good hyperinflation. What did the citizens of Bulgaria do before you fixed it? Oh, they were in a – it was a complete disaster. Did they use another currency as a de facto medium of exchange? Yeah, they tried to get rid of their Bulgarian love, the local currency, as fast as they could.

And get into basic dollar, Deutschmark, then Deutschmarks and dollars. Deutschmarks were in heavy circulation, but so were dollars. So it was kind of already de facto dollarized before you stepped in.

Yes, but – and this always happens with the hyperinflation because you – everybody anticipates that things are going to get worse and they get rid of their local currency as fast as they can. So they either buy goods, groceries, sugar, bricks, cars, anything they can possibly afford to buy, or gold or some foreign currency. They get out of the local currency that’s hyperinflating, which of course makes the thing hyperinflate even more because the velocity of the currency starts turning over faster and faster as you hyperinflate.

So at any rate, we put that in in July of 1997, and within 30 days, inflation had come down to high single digits, annual, not monthly. So it crushed the thing immediately. Then within a year, the money market interest rate had gone down to – excuse me – 2 percent.

And the foreign reserves – excuse me – more than doubled in a year, so highly successful. It’s still in place today, and I’m very proud of that. You said, what’s the proudest thing? Probably that.

There have been a lot of – I’ve lived a little bit of a charmed life, but that was a big one. They do call me Father of the Currency Board, and I have three honorary doctorate degrees from Bulgarian universities, including the Academy of Science in Bulgaria. So that one is – Is there a case today, a modern case of a country that’s currently hyperinflating that could benefit from a currency board in the 21st century? Yeah, we have Zimbabwe.

Okay. Which I’ve advocated either to fully dollarize – I think for Zimbabwe, just get rid of the local currency and central bank and dollarize, which is kind of a cousin of a currency board. Because a currency board emits a local currency.

It trades at a fixed exchange rate with an anchor currency, and it’s backed 100 percent with the anchor currency. So what does that mean the local currency is? It’s just a clone of whatever the anchor is. What happens then if the U.S. hyperinflates? I mean, we can’t use – Americans can’t use another currency, can we? Well, yeah, you could use it.

Could you imagine the Americans using the euro or the yen or the Swiss? No. Number one, the U.S. never has hyperinflated. That’s right, yeah.

Even right after the revolution, it came close with what they called the continentals, the continental currency, but it never did hyperinflate. And there have only been 67 hyperinflations in world history. The last one, by the way, Josh Blinstein and I just published an article.

It’s in World Economics this month, March of 2025 as we speak. Excuse me. And that’s on the Lotz ghetto.

And the Lotz ghetto was basically a Jewish concentration camp. It was a Jewish ghetto, but they had their own currency, and it hyperinflated two times, once in 1942 and once in 1944. But that’s in the – that’s the 67th case.

I keep track – every hyperinflation that’s ever occurred is in the Hankey-Crews World Hyperinflation Table. And I’ve calculated originally with Nick Crews, one of my former students, all of these things using the primary data and documents. The first hyperinflation was in France in 1776.

And we got all the original documents and everything, and we recalculated what it was. And then things went until almost World War I before we ever had another hyperinflation. Then we had some in World War II.

We had another batch of them after the communism fell in 1990, 1991. Do you think the U.S. is headed for higher inflation if not hyperinflation now? Or in the foreseeable future? I think it’s headed for lower inflation because changes in the money supply – you have to ask, well, what causes inflation? The general price level to go up and down, like the Consumer Price Index, for example. And that is caused by changes in the money supply that have occurred maybe a year ago or two years ago.

And what’s happened a year ago or two years ago in the United States? The money supply has been dropping. The stock of money broadly measured by M2 is actually less today than it was in June of 2022. So when that happens, this gets transmitted with a lag, of course.

Change in money supply, that change gets transmitted with a big, long lag, and eventually inflation will change. So I think inflation going down, continuing to go down is, as I like to say, baked in the cake because it’s – we don’t have to look at what the Fed’s doing today, David. We look at what happened a couple of years ago.

At what point in your career did you become a monetarist or adopt a monetary theory? I would say it was always kind of on the back burner, but it became front burner, I would say, around the mid-1980s. Okay. And that was when I started trading heavily and became associated with Friedberg Mercantile Group in Toronto, Canada.

Yeah. Which we were trading currencies and precious metals, mainly then, and foreign bonds. So to understand those markets, it’s fundamental to understand what’s going on with the quantity theory of money.

You have to have a model. In other words, at Friedberg’s, we were fundamentalists. We weren’t driven by data dependency, watching every little piece of data coming out today.

We wanted a theory and a framework. Would you say the central bank at the time, at this particular time of the U.S., was more, I would say, open to monetarism than it is today? Oh, well, it was completely, because Volcker was the chairman of the Fed. Yeah.

And he was a monetarist. He was appointed in the late 1970s, and we had stagflation then. And Reagan gave him the license to get rid of the inflation.

And to do that, he squeezed the money supply and slowed the money supply. It turned out that Volcker had the right theory and the right idea, but the measurements of the money supply then were faulty. They should have been using what they call a division measure, which we don’t have to get out in the weeds on that.

But actually, he tightened up. But if he would have been measuring the money supply properly with division measures, he would have realized that he was overdoing it. And that’s why we had, remember, in the first Reagan term, we had two recessions, actually.

Yes. So Volcker overdid it because it was like having a speedometer in your car, and the thing wasn’t calibrated right. It would be like having a speedometer, and it says, well, you’ve got the thing going 60 miles an hour, but in fact, you were going 40.

So again, Volcker was definitely a monetarist, and Greenspan more or less was. But the high inflation of the early 80s that came down eventually, that wasn’t the result of the higher Fed funds rate, the double-digit Fed funds rate? No, no. It’s just the opposite.

Because people say Volcker raised the interest rate to double digits. That brought down inflation. That wasn’t it? Well, no.

What brought down inflation was he slowed down the money supply. All the monetary tools were put in place to do one thing, slow the money supply down. And why? Because he knew by slowing the money supply, eventually inflation would come down.

Yeah. And maybe just explain to the audience why lowering or raising the interest rate does not directly control the money supply. Well, it indirectly affects what banks are doing and the amount of loans that banks are making.

And so it does have some loose and fuzzy effect on things, particularly if you really change the Fed funds rate dramatically, as Volcker did. As you know, we were up – I can’t remember now the peak, but it was way up in the double-digit range. You’re an experienced currency trader, like you just said.

Tell us what influences currency pairs, what drives currencies, and we can talk about currencies today. Well, interest rates – monetary policy is not about interest rates. It’s about changes in the money supply.

But coming to interest rates, they do have a significant effect on currencies. And particularly in the modern era, the thing they call carry trades – carry trades are where you’re – and these are just interest rate differentials, arbitrage. You borrow in a country that has very low interest rates like Japan.

That’s a big source of the carry trade. And then you invest in some place like Turkey that has very high nominal interest rates. And the game is that, of course, you win if – the high interest rate country that you’re investing in, if the currency doesn’t collapse on you or go down at a very rapid rate.

If it’s going down at a very rapid rate, that arbitrage differential disappears. Okay. Let’s say the arbitrage gap between Japanese yen and – I don’t know what it is exactly today, but let’s say it – between that and the Turkish lira, let’s just say it was 15 percent or 20 percent or whatever it is.

Well, if the lira is going down more than the gap – let’s say the gap between the low interest rate borrowing and the high interest rate investing was 20 percentage points. What if the depreciation of the currency in the high interest rate country is going down faster than 20 percent? You lose. Do you think the dollar’s about to strengthen? The dollar remains very strong against all the currencies.

But the most important pair in the world is the dollar-euro rate. And it’s 108 or something like that today. I haven’t looked today.

It’s 108. Oh, just high level. How would you evaluate the strength of the U.S. economy versus, let’s say, the euro area? Oh, it’s much more stronger than the euro area.

The euro area is toast. I mean, the growth rate in the U.S. since the great financial crisis versus Europe, it’s been about twice as fast. And now Europe, we’ve got – the dogs of war are leading all these European countries.

They want to go to war with Russia. They want to increase defense expenditures. That’s a complete waste of money and completely insane and delusional.

Is that because Trump wants to step away from defending Europe? No, no. It’s because they think Russia – they claim Russia is an enemy and Russia is going to invade Europe and take over Europe. Do you think Germany is going to hyperinflate? Let’s say they’re re-militarized and then they repeat the Weimar Republic where they increase their spending.

Their deficit widens because they re-militarize and inflation goes up. Well, the great inflation in Germany of 1923, these hyperinflations are very rare. People talk about it loosely, but remember, there have only been 67 in history.

So they’re very rare. Germany is in big trouble because they have a manufacturing sector that’s heavy, about 23 percent of GDP is manufacturing in Germany. The average in Europe is, to give you an idea, about 12 percent manufacturing.

So German – they have a big manufacturing sector and it thrived off cheap energy. Manufacturing is very energy intensive. So where were they getting the cheap energy? Well, it was Russia.

And now the Germans stupidly have cut themselves off from Russia and say Russia is the enemy. So the prices for electricity are sky high in Germany. And the greens in Germany have completely taken over everything.

So what do you have? You have wind, solar, no nuclear power. Merkel, by the way, who was not a green, but head of the CDU, which the new prime minister, Merz, he’s the leader of the CDU now. She mothballed nuclear power after the Fukushima disaster in China.

She panicked and hit the panic button and did a stupid thing, said that we were going to decommission all of the nuclear power. And then on top of it, we then had the Russian gas cut off. So Germany is in very bad shape.

And now Merz is a dog of war and wants to remilitarize Germany, which will end up in a complete disaster for the economy. I mean, and the economy is more or less flat line since the great financial crisis. I mean, if you take a look at what happened in the U.S. in World War II, the country basically militarized for the war.

And the war effort, one argues, could have been one of the reasons the economy came out of the Great Depression. Right. So could an industrialization for the purpose of militarization boost the economy? No, the analysis of that, Robert Higgs has analyzed this.

And this is this is this is all what you’ve repeated as a standard propaganda. OK. It didn’t it didn’t happen that way.

And you read it, read Higgs. And that is definitive on on the fact that what you said, which probably ninety nine point nine percent of the population believes to be true, that the war pulled us out of the Great Depression is simply not true. OK.

Can you explain why? What’s wrong with what I said? I thought we were going to have a short interview. Keep it relatively high level. All right.

Let me rephrase the question. What what pulled us out of the Great Depression? We we really got pulled out of the Great Depression by ultimately the private sector coming online after World War II. OK.

It was a private sector that brought us. And by the way, this is just off topic, but the public debt during World War II skyrocketed. And people today are complaining about the debt problem may pulling us into some sort of economic calamity.

But if you take a look at what happened in the 40s and 50s, we had skyrocketing private debt. And as you said, the private sector ended up pulling the economy out of a Great Depression. So actually, the correlation was higher debt, higher growth.

Well, I know there was a lot of debt that was the record level in terms of debt as a percent of GDP was in World War II. But the economy, the private everybody came back from the war. The private sector got cranked up and everything started to grow.

But remember, Eisenhower was a president and he was more or less balancing the budget. Sure. So there was a strong fiscal control.

Let’s show Professor Hankey’s wall now. We’ve got Mrs. Hankey and myself meeting with President Pinochet in Santiago. I think I’m the only American who ever met privately with.

Well, the free market revolution in Chile was all about the Chicago boys. And it was all about Pinochet giving the Chicago boys a license to do economic reforms. This is in Mexico City.

This is Nobel Laureate Milton Friedman and Mrs. Friedman, Mrs. Hankey, myself around 1990. What was your relationship like with Milton Friedman? Oh, it was great. Great friend, great mentor, wonderful guy.

Up here we have Mrs. Hankey and myself in Buenos Aires with Carlos Menem and Domingo Cavallo. Menem, of course, was the president and I was his advisor for 10 years from 1989 to 1999. Domingo Cavallo was a famous finance minister.

I was his advisor, too. Here we have a good friend and great Nobel Laureate in economics, Ronald Coase, University of Chicago. This is one of my great students.

He’s now in Hong Kong. Up at the top row we have the one on the left, that’s Senator Dole, who was the speaker, and Steve Sims, Senator Stims, and that’s when I was the chief advisor for the Joint Economic Committee. The one down below, that’s the first president of Ukraine, Kravchuk, who was here visiting me.

That’s you on the left. That’s me on the left, Kravchuk on the right. In the top picture, the one on the right, the kind of tall fellow, is Kurt Schuller, who I’ve done almost all my work on currency boards has been with Schuller.

He was a postdoctoral student of mine and now is a high civil servant in the U.S. Treasury. Moving over here, the guy right in the middle is Lars Jönig, who I’ve written a number of books with on currency. My last book with Jönig was written in 2023.

Did lockdowns work? The answer is no. They were a disaster. The top photo there was the prime minister of Lithuania, where I was the state counselor.

Suslovičius is his last name. And moving down to kind of the middle of the thing, that’s President Nazarbayev of Kazakhstan. I was his advisor.

And the bottom one here, President Suharto, I was his advisor in the Asian financial crisis. And over here, I’m speaking with the head of the Duma in Russia. This was maybe 1991 or something like that.

It was pretty soon after the Soviet Union collapsed. And this one, Gramish Pashko and I, he was really the number one. He was a deputy prime minister, but he was an economist in charge of all the economic reforms.

And I was an advisor in Albania. Here are some of my students, one of my classes. I can’t remember what year, probably 2022 or 21.

Which one of these photos do you think had the most impactful memory, do you think? Oh, I like them all. Former C.J. Arena, former chief of staff, one of my best chiefs of staff. He’s still working with Jeffrey Wang right now.

He’s in private equity. Do you want to say hi, Jeffrey? Thank you. It’s been a pleasure to work with you, Professor.

I’m getting to see all these really absolutely wonderful photos that have all these memories, which I get the pleasure of hearing about. So I like them all. Let me show you one of my good friends from high school days.

He’s a year—Cactus Jack Berenger, one of the great entrepreneurs who made a fortune on sales on television. And Jeffrey, what was the big program he was on? Shark Tank. Shark Tank, yeah.

He made it big time in Shark Tank. But he grew up where I grew up in rural Iowa. So that’s about it.

I like them all. Here’s one I’m going to get. I just found out over the weekend who this was.

This painting is in the Louvre, actually. And the significance of this, you’re looking at the first modern economist, even before Adam Smith, Richard Cantillon, Irish slash French. He made a huge fortune in the Mississippi Company and predicted that the Mississippi bubble would burst and got out before it did and went from being long to short and made another fortune as it went down.

So I enjoy these. By the way, Mark Thornton is the one, an economist at the Mises Institute in Auburn, Alabama. He’s the one who researched this and found out that this was, in fact, Cantillon.

No one knew before his research that he’d done it. He’s pretty much an expert, Thornton, on Cantillon’s work. Okay, so let’s finish off here.

What would you advise President Trump’s administration to do now to, A, stabilize inflation? No, we don’t want deflation. We don’t want high inflation. And also, have a system whereby the American standard of living increases over the next four years.

So, well, number one, in principle, it’s the Fed who’s going to decide about inflation because the changes in the money supply. You don’t think it’s the President? The President’s been pressuring the Fed to lower interest rates? No, it depends on what the Fed does. So, for example, let’s say that the same thing that occurred during COVID, that the deficit continues to be big and wide and that the Fed decides, oh, we’re going to buy the bonds that are being sold by the Treasury to finance that deficit.

Then we’d have another problem with inflation. If they don’t buy the bonds, if they don’t monetize the debt, right now the growth rate in the money supply, M2, is only 3.9 percent per year. Hankey’s golden growth rate, consistent with hitting a 2 percent inflation target, is 6 percent.

So it depends on a lot of things. And I think the biggest long-run concern I have, and one reason I’m on the board of the Federal Fiscal Sustainability Foundation, is that I would like to see Article 5 of the Constitution invoked and there be a constitutional convention where we talked about one thing, and that is putting some kind of break on the fiscal deficit and debt. So we’ve had all kinds of statutory quick fixes and so forth.

They never work to control things. And no administration has been very effective at it. The only ones we’ve had, we’ve had three, that ultimately were able to squeeze government down as a percent of GDP or squeeze it down relative to the total size of the economy.

Eisenhower was one, and then Reagan not quite as much as Eisenhower. But the big one was actually Bill Clinton. Bill Clinton was the most conservative and the one who squeezed the government spending down.

And the reason he did that, of course, we had a divided government then. Remember, Newt Gingrich was the Speaker of the House. So you had the White House with Clinton, who was a Democrat, and Gingrich was a Republican, both of them pretty clever politicians.

And they decided the only thing they could do was basically use the peace dividend that was coming after the Soviet Union collapse, shrinking defense and shrinking the government. And that’s the big story. It’s the peace dividend.

Now, what do we have? We’ve got the war cost. We’re expanding. The only thing in this new budget that went through that really expanded is the Defense Department.

Yes. Yeah. So we’re going in the opposite direction right now.

We’re going to burn through and waste that they talk about. So all this talk of making the government more efficient, that’s not going to really help with the deficit issue, you think? It looks like to me there’s right now, as we speak, a lot of smoke and mirrors. There’s a plan out there, just a plan, an idea, that if they save up to $2 trillion of spending over the next couple of years, two years, I think it was a projection, then 20 percent of that would be paid back to Americans in the form of a check.

So basically a tax refund, if you will, of the order of $5,000 per household. What do you think of that? Well, I think it’s – from a political point of view, I think it’s very clever. I think it would be very popular.

Okay. But? Well, are they going to get $2 trillion? I don’t know. That’s my point.

As I say, we talked about this before going through the Grace Commission. It was a great idea, and the commission came up with a great report, a lot of sensible recommendations. But sensible is not a word that’s associated with Washington, D.C. It’s much more complicated than that.

One of the big things I was trying to do in terms of surplus assets, and I was the guy in charge, was to sell some of the surplus Army bases and Naval bases and Air Force bases. But that ran into a buzzsaw right away because every one of those bases is located in a state, and there’s always a congressional district where they’re located. So you’ve got one congressperson who’s going to be against it.

They don’t want to shut it down. And you’ve got two senators in each state, so you’ve got two senators. So right away you have three politicians who are against, and that makes it very difficult to get things done.

What was President Reagan like? You met him? Oh, yeah. I knew him when he was governor of California because at that time I wasn’t at Johns Hopkins. I was a professor at the University of California at Berkeley, so I met Reagan initially then.

He was an interesting personality in a couple of senses. One, if he walked into a room, the thing would just light up. He wouldn’t have to say anything, and that’s one thing.

Two is that he knew how to use rhetoric. He was very practiced. We know he was in the movies.

Okay, that’s one thing. A lot of movie people don’t know how to use rhetoric, but Reagan, remember, had a radio show, and he was writing all of his own text himself in longhand. Really? He wrote his speeches? No, not when he was president, on the radio.

And Marty Anderson actually edited two books of these things after Reagan’s second term came out. One of the books is called Reagan in His Own Hand, and everything is written out in hand. We have one of the pictures that we went through on my wall, Senator Steve Sims from Idaho.

He was the first politician. He was in Congress then, but in 1976, Sims was the first one to support Reagan. Reagan didn’t win that 76th election, or nomination, I should say.

But Sims traveled with Reagan a lot, and he said you’d get on a plane with Reagan, and he’d take out a yellow pad and a pencil, and he’d start writing them. He had what people said was universal appeal across both aisles, Republicans and Democrats like that. Right, right.

He knew how to, you know, this great book, which I have at home by Dale Carnegie, How to Win Friends and Influence People. Yeah. He was that kind of guy.

You had to like him. He wasn’t the guy who was going to get in your face. How much was Reagan’s policies responsible for the fall of the Soviet Union? Because we read that in the history books, but could you evaluate the truth in that statement? I think that’s part of the, you know, shall we say that’s the storyline, kind of.

That’s the American propaganda. I think the Soviet Union was really on its last leg. And fortunately, Reagan was smart enough, with Gorbachev, to wind the thing down in a peaceful way.

When you think about it, it was a huge event. What happened that was bad? I mean, did anyone shoot off any missiles? You know. Yeah.

It was a pretty smooth transition from one total regime or system to another. Okay, there were some things. There were some hyperinflations that broke out.

I mean, Bulgaria wasn’t part of the Soviet Union, but it was under the boot of the Soviet Union. And they had a hyperinflation. Estonia was part of the Soviet Union.

It had a hyperinflation, one that I helped stop in 1992 because we put in a currency board. They were using the ruble in 1992 in Estonia. They didn’t even have their own money.

So in June, June 20th through the 22nd of 1992, we installed a currency board, which I’d written a book with two people we have up on those pictures. I mentioned Kurt Schuller and Lars Jönig. And yours truly, the three of us, wrote two books proposing and laying out the architecture for a currency board in Estonia.

And they did it. I went there in May and addressed this. Then it was still called the Supreme Soviet of Estonia.

Right. And I addressed them and sold them on the idea. That was in May.

And in June, we did it. You have a new book coming out. It’s called, I believe, I’m paraphrasing, but correct me on the top, 21st, well, Currency Boards of the 21st Century.

Yeah, Currency Boards for the 21st Century. So about four months ago, Leland Yeager and I published, Palgrave MacMillan published a book called Capital Interest and Waiting. So that’s out.

April 29th, Wiley is going to publish a book Matt Sikirke and I wrote called Making Money Work. And the next one, which will come out this year, Kurt Schuller and I have, and I have actually the manuscript over there. It’s about that thick.

The first draft of it, it’s called Currency Boards for the 21st Century. And what we do, we’ve been working on this thing for about 30 years. What we did, we took the, all of, we gathered all the financial statements for every currency board that’s ever existed.

And this meant literally going all around the world, a lot to London. We sent students to London, I think, three different times. A lot of these things were in colonial documents that were in London.

And we digitized it all to actually see how these things were working. And the conclusion is they worked pretty much as we thought they were working. But now we have proof.

Sure. We’ve measured everything and have it all buttoned down. I mean, do we need a currency board for the 21st Century? Yeah.

Well, we do need a currency board. And most developing countries have terrible central banks. You’ve got to get rid of the central banks.

Well, Argentina didn’t use one. Javier Millet decided not to. And apparently the inflation rate is coming down somewhat.

Well, it’s still, I don’t know what the year-over-year is now. I think it’s 100 and… Jeffrey, can you look at Notion? Show David how this thing works now. So it’s a little, it’s still triple digits year-over-year.

It’s coming down. But Millet made it… Would it have been more effective if they had dollarized? Yes. There’s no question about it.

I think Millet made a big mistake by not dollarizing. Why do you think he didn’t do it? Because he talked about doing it and then he didn’t do it. I think he was pressured by the economic establishment and the IMF.

And since they owe so much money, $44 billion they owe to the IMF. And I think the IMF called the tune and talked him out of it. The IMF, when we dollarized Ecuador in 2001, I was the advisor, the finance minister, and the IMF was going on and on.

This wouldn’t work, this wouldn’t work. It worked like a charm. The IMF basically doesn’t know what they’re talking about.

A lot of rubbish from the IMF. But, Jeffrey, thank you. Jeffrey’s just handed me… The CPI for February, while it is down to 67%, I thought it was still triple digits, but the money supply, M3, is still growing at 123% per year.

So inflation isn’t going to die that fast. And that might be the Achilles heel of Malay. I wrote an article in Fortune magazine with a colleague about two weeks ago.

I guess it was two weeks ago. And we showed how successful the reforms have been and the economy has come back to life. But we did indicate the Achilles heel was going to be the peso.

Yeah. That’s always the case in Argentina. The peso ultimately gets them.

I want to close the conversation by talking about education. You’re also an educator here at Johns Hopkins. You’re a professor.

You’ve been here for many, many decades. How do you feel about the possibility of abolishing the Department of Education? Is that necessary? I think it’s a great idea. Before the Department of Education, the expenses for education in the United States were actually inflation-adjusted terms coming down.

And the test scores were going up. Since the Department of Education, the cost has skyrocketed, even inflation-adjusted, and the test scores have gone down. So that’s a fairly telling thing, at least at 30,000 feet.

It’s been a complete disaster. Okay. So it was much better before we had the Department of Education than after.

You do an event study. You know about the event studies with the stocks. You look at the stock price before the event, the announcement of some new deal they’re doing, and then you look and see what happens after the event, and you then determine, well, has the new deal been good or bad? And you can tell by looking at the stock price.

What are the major problems of the education system today that need to be fixed at all levels? Well, number one, there are way too many university students in universities. This has exploded since really the 1960s. That was before the Department of Education.

But the expansion, you just have every little college now, they’re not a college, they’re a university. They changed their names. And they have graduate programs producing fifth-rate scholars.

We just have too much at the university level, in my view, a lot of low-level things. So that’s one problem. And at the lower level, grade school, junior high and high school, it’s the teacher’s unions call the tune, and the level has gone down.

You look at the test scores in the United States. They’re pretty embarrassing. Right.

I mean, the counterargument is you’ve got to give opportunities to as many people as possible for post-secondary education. Yeah, but there are many ways to do that. What about trade schools? You teach somebody how to be an electrician.

Why should they be going to some third-rate college getting a college degree? Instead of dumping everyone into what they call a university, we should be specializing in training. And some of this is coming, by the way, because of things that you can do online. So what’s your advice to younger people today? How do they stay competitive in the future? I think the key is you have to do something that you’re passionate about.

If you’re passionate about being a plumber, by God, be a plumber. And by the way, you’ll make pretty good money. The main thing is to have a satisfying life.

And the only way you can have a satisfying life is to do things that you’re passionate about, not do what people tell you you have to do. Oh, you have to go to the university. You have to get a university degree.

That’s the kind of mindset that a lot of people have. And I think it’s the wrong way to go. Even with the students at Johns Hopkins, we’ve got one of the top research universities in the world, and there are a lot of students, quite frankly, they’re here because they’ve gotten very good test scores, and their parents or whoever has pushed them in that direction.

But with a lot of them, I can tell there isn’t much fire under them. They don’t really know why they’re here, except they’ve scored very high on test scores, have very high grades, and somehow have the idea that they should be here. But once they get here, they’re wondering around, basically wondering what to do.

Some are very passionate about what they’re doing, and you can tell right away whether they’re going to be successful. The ones who have fire, you know. Well, I appreciate you spending time with us.

What’s the best way to find your work, Professor? The best way is Twitter for kind of current real-time things, at Steve underscore Hankey. And what we just went over, we’re plunking along here. Yeah, there’s Twitter, and then there’s your email as well.

Okay, 794,500. On the road to one million, no doubt, very soon. Well, with the advice you gave me today, I’m very optimistic.

You’ve got a great team. Jeffrey is keeping things under control. So the Twitter is one thing, at Steve underscore Hankey.

The other thing is, and a lot of people, the David Lynn, they write me, and I put them on my weekly distribution, and that’s just my email, hankey at jhu.edu. What’s the legacy you want to leave to the world? How should people recognize your work currently? I don’t really think about it too much. The main thing is, as far as narrowing it down, that you have some students who go away and say, you know, Hankey really changed my life. That’s the student part of it.

The rest of it is all family, making certain everybody is Mrs. Hankey, and I go cruising along for as long as we possibly can. I do have one final question for you. All right.

What’s your secret to a successful marriage? You’ve been with Mrs. Hankey for how many decades now? For many decades. Well, you know, I mentioned to you, I’ve clearly lived a charm life. Yeah.

I was lucky. The minute I laid eyes on Mrs. Hankey, it was love at first sight. Sure, yeah.

And it turned out it worked like a charm. All right, yeah. How did you stay together this long? Oh, it’s easy.

It’s just, you know, from day one, it was, you know, as they say, a good match. We have a lot of things that if you have two Venn diagrams, one Mrs. Hankey and one me, there’s a huge overlap in terms of our interests and tastes and all kinds of things, which, of course, Mrs. Hankey is a Parisian. I’m just a rural country boy.

But it turns out as time goes on, the Venn diagrams, they more and more overlap. So it’s important to find somebody who has common similarities. Opposites don’t attract.

Yeah. I’ve never observed many opposites that work out very well. All right.

Well, continue to stay tuned to our show, and we’ll have Professor Hankey on again in the near future, remotely, of course, but this has been a great honor to finally meet you. Yeah, you’ve got to get down here more frequently. Yeah, yeah, we’ll do this again.

Thank you very much. Okay, thank you. All right, take care for now.